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Edited version of your written advice
Authorisation Number: 1051298407978
Date of advice: 23 October 2017
Ruling
Subject: Foreign Pension
Question
Is the pension you receive from Country X assessable income in Australia?
Answer
No
This ruling applies for the following periods
1 July 20xx to 30 June 20xx
1 July 20xx to 30 June 20xx
1 July 20xx to 30 June 20xx
1 July 20xx to 30 June 20xx
1 July 20xx to 30 June 20xx
The scheme commences on
1 July 20xx
Relevant facts and circumstances
You are a country X citizen.
You are a resident of Australia for tax purposes.
You were engaged in doing government functions in Country X.
You had work related health problems.
You receive a pension from Country X.
Your spouse is an Australian citizen.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(1)
Article 19 of the Country X Agreement
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
A pension is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
In determining liability to Australian tax on foreign source income it is necessary to consider not only the income tax laws but also any applicable tax treaty (double tax agreement).
There is a tax treaty between Australia and Country X (Country X Agreement). The Country X Agreement operates to avoid the double taxation of income received by Australian and Country X residents.
An article of the Country X Agreement deals with government service pensions. The Country X Agreement provides that any pension paid to an individual in respect of services rendered in the discharge of governmental functions in Country X will be taxable only in Country X. The pension is taxable only in Australia if the individual is a citizen or national and a resident of Australia.
In your case, you are only a citizen of Country X. Your pension is therefore taxable only in Country X under the Country X Agreement, and is consequently not included in your assessable income in Australia under subsection 6-5(2) of the ITAA 1997.